Residents aren’t only ones leaving California

The high cost of doing business in California seems to be driving businesses out of state, as well, according to a survey from Claremont McKenna College.

“The 2022 Kosmont-Rose Institute Cost of Doing Business Survey found that 64 percent of businesses have left California over the past 30 years and relocated to lower-cost states, namely Nevada, Arizona, Texas and Oregon,” a news report said.

Las Vegas was the most popular destination for relocating businesses. There were 158 cities in the western United States that were analyzed based on average office rent, median home values, sales tax, business license fees, utility tax, minimum wage and median home values. Chief among the most expensive aspects of doing business in California is labor costs.

Just a few days from now, on Jan. 1, the minimum wage in California will go up to $15.50 per hour. That’s more than double the minimum wage in Utah, Texas and Idaho. And while the minimum wage still isn’t enough to live on in California, a wage like that in those other states would likely stretch much further.

However, just as individuals struggle with the cost of living here, so, too, do businesses. A minimum wage of $15.50 is too much for some businesses to pay their employees, so they must relocate.

“Doing business in Southern California has many benefits, but the costs make it increasingly hard to pull off,” Ken Miller, director of the Rose Institute of State and Local Government said in a news report. “Rising home values, office rents, labor costs, and burdensome new state and local laws were variables to watch this year as these costs continue to escalate.”

But while many businesses are leaving, many are not. The state remains attractive to some, but one thing to take into consideration is whether the business has an operational or strategic reason for being in California. If the answer is “no,” then the higher prices here could pose a real challenge to running a profitable business.